CORPORATE

Finlays Tea Estates profit soar in 2010

Finlays Tea Estates Sri Lanka, the holding company of Udapussellawa and Hapugastenna regional plantation companies, released the annual reports of the two plantation companies and reported strong profit growth in 2010.

In the financial year 2010, Udapussellawa Plantations reported its highest profit since privatisation in 1992, with a profit after tax increase of 352 percent over 2009, for a profit after tax of Rs 139 million, said Finlays Tea Estates in a press release. Udapussellawa Plantations' Tea production increased by 22 percent against the previous year.

"The strong performance by Udapussellawa Plantations is due to extensive restructuring since 2005. As part of this process, large tracts of tea were replanted, especially in the Nuwara Eliya region, which generated yields of 4,000- 4,500 kgs per hectare per year. This has helped increase the overall tea yield significantly.

In addition, Udapussellawa Plantations' new CTC Tea factory in Matale helped boost production by increasing the intake of out-grower leaf by 34 percent during the year," said the Chairma/Managing Director of Finlays Tea Estates Sri Lanka Naresh Ratwatte,.

Meanwhile, Hapugastenne Plantations reported a Rs 287 million profit after tax, an increase of 196 percent compared to 2009.

Tea production by Hapugastenne increased by 21 percent and rubber by 18 percent compared to 2009. The contribution by rubber increased significantly during the year. From a 4-5 percent share of profits in the past, the contribution from rubber increased to 35 percent of Hapugastenne Plantations' annual profit in 2010.

Hapugastanne Plantations has introduced rubber in their Passara group of estates on an additional 702 hectares.

These fields have now started contributing towards the profits of the company.

Therefore, the company is expected to continue to benefit from rising global Rubber prices in the future.

"We are confident that rubber will help mitigate any future fluctuations in Tea prices.

In addition, the location of Hapugastenna Plantations' rubber extent, in the semi-dry zone, in the eastern belt of the country, will be an advantage, because when the rubber supply in the wet zone reduces during the monsoons, Hapugastanne will still be able to supply rubber," said Ratwatte.

"We expect tea prices to remain at 2010 levels in 2011.

While rubber prices have seen some fluctuations with the recent tsunami catastrophe in Japan, prices are expected to stabilise in the short term," said Ratwatte.

In 2010, the Passara group of estates, belonging to Hapugastanne Plantations, became the first Sri Lankan plantation company to acquire the Rainforest Alliance Certification.

The Rainforest Alliance Certification is the most stringent socio-environmental standard for the agro-industry in the world.

Udapussellawa Plantations' Nuwara Eliya group of estates and Hapugastenne Plantations' Hali Ela group of estates are in the process of acquiring the Rainforest Alliance Certification in 2011.

The plantation sector was hit by extreme weather conditions at the start of 2011, hurting tea and rubber production in all parts of the island.

More bad weather, later during the year, could adversely impact company and overall industry profitability, according to a spokesman for Finlays Tea Estates.

The wage increase due from April, if over-inflated, could also increase cost of production, said the company.

In addition, the electricity tariff increase of 11 percent and the increased cess, levied on tea and rubber industries of 3.5 percent and 4 percent could stifle industry growth prospects due to the increase in the cost of production.

"We take every strategic decision and action in line with identified group sustainability commitments, by which we now guide our actions and evaluate our success.

We have four key strategic objectives to focus on over the next few years; first and foremost, we need to increase the shareholder return on invested capital, secondly, we need to reduce complexity and risk, thirdly, we need to add more value and get closer to our customer and fourthly, we need to, and must, build a more sustainable future for our business.

Work on these objectives has commenced and we have been making good progress over the years with most of the key indicators moving in the right direction," Ratwatte said.

Finlays Tea Estates says it will continue its accelerated program of planting timber and rubber in the east and cinnamon, pepper and arecanut in other parts of the country, to diversify the company's plantation product portfolio.

Outlook revised to stable:

Bartleet Finance's BBB-/P3 ratings reaffirmed

RAM Ratings Lanka has reaffirmed the long and short-term financial institution ratings of Bartleet Finance Limited (BFL), at BBB- and P3. Concurrently, the outlook on the long-term rating has been revised from negative to stable.

The revision of the outlook has been prompted by the improvement in the profile of the Company's loan portfolio, which is expected to result in a sustainable improvement in asset quality.

The reduction in the Company's Non-Performing Loans (NPL) was aided by its parent Bartleet Transcapital Limited (BTC), which is the holding company of Bartleet Group's financial services arm.

Meanwhile, BFL's ratings remain supported by the sturdy franchise of the Bartleet Group.

The ratings also reflect the Company's moderate funding, liquidity and capitalisation levels. On the other hand, these positives are offset by BFL's size and branch network, which is smaller than those of its similarly rated peers.

BFL was incorporated in 1983 and is 87 percent owned by BTC, which is a group of companies offering a wide range of financial services, coming under the umbrella of the century-old local conglomerate Bartleet Group (the Group). The Company accounted for 2.02 percent of the Registered Finance Company (RFC) industry's assets as at end-September 2010.

BFL has been gradually expanding its reach; the Company added three new branches to its existing six in FYE 31 March 2010 (FY Mar 2010).

Although the value of BFL's NPLs increased in FY Mar 2010, curtailed lending to high-risk loan segments and the assignment of two delinquent loans to BTC in subsequent months had brought about an improvement by end-December 2010.

The Company's gross NPL ratio had climbed up from 3.00 percent as at end-FY Mar 2009 to 9.59 percent as at end-FY Mar 2010, before easing to 6.93 percent as at end-December 2010.

The NPLs had largely stemmed from lumpy cheque-discounting loans to a few traders that became delinquent owing to the weak economic climate in FY Mar 2010; lending to this segment has since been discontinued.

Meanwhile, we have observed gradual improvement in the Company's loan-ageing profile in the first nine months of FY Mar 2011 (FY Mar 2011), thanks to better collections amid its increasing focus on its core business of hire-purchase (HP) and leasing, which have traditionally exhibited low delinquency rates, as well as the more conducive macroeconomic conditions.

Moreover, we expect BFL to be less exposed to lumpy delinquencies as more emphasis is placed on expanding its three-wheeler financing business and as the Company ventures into micro-finance. These, together with the more favourable macroeconomic landscape, are envisaged to support a sustained improvement in BFL's asset quality.

In terms of financial performance, BFL's net interest margin (NIM) continued to narrow, because of its curtailed lending despite the increase in deposits. Its NIM deteriorated from 9.10 percent in FY March 2009 to 7.00 percent in FY March 2010.

This narrowed further to 6.35 percent in 9M FY March 2011, as funds had been channelled to capital market activity mainly in equity investments, and real estate. Concurrently, its non-interest margins had broadened. BFL's pre-tax profit strengthened from Rs. 38.61 million in FY Mar 2009 to Rs. 69.07 million in FY Mar 2010, buoyed by gains from the equity investments.

Returns from the latter had been aided by the support of its sister company, Bartleet Mallory Stockbrokers (BMS), a joint venture between BTC and Religare Capital Markets Limited of India.

NAMAL buoyant of rapid growth

Union Bank's strategic acquisition of a 51 percent stake of NAMAL will enable Sri Lanka's first unit trust company to leverage its well established market position with the strength and backing of one of Sri Lanka's fastest growing Banks.

NAMAL is forging ahead with a new strategic direction backed with the expertise of a new Board of Directors supported by well established product lines, a strong brand image and a customer base that will take the company to new heights, said the newly appointed Executive Director of NAMAL Avancka Herat.

He said that as part of the new strategic direction and business strategy, the company is considering branding as an integral element and recently unveiled a new corporate identity that projects the transformation of NAMAL as a much stronger and dynamic player, whilst communicating the brand premise of value creation for investments to its preferred target audiences.

The current shareholders of NAMAL are Union Bank, DFCC Bank and Ennid Capital. NAMAL declared the 19th annual dividend for its flagship National Equity Fund (NEF) of Rs. 2.50 per unit on March 30, 2011 to all its unit holders.

CEO of NAMAL S. Jeyavarman highlighted that NEF pays an annual dividend in March every year, has done so continuously from its inception in 1992, 19 years ago. This dividend of Rs. 2.50 per unit translates to a 25 percent tax free dividend for investors who entered the fund at Rs 10. In the relevant dividend year ended February 28, the unit buying price increased from Rs. 22.13 to Rs. 30.63 a highlighted 38.4 percent increase, he said.

NEF being the balanced fund invests in equity and debt markets and the Fund has the added advantage of being able to change its asset allocation to best suit the movements of the market, thereby adding value to the investor in the fund while enhancing the overall risk adjusted return to long-term investors.

Key changes at CDB

Citizens Development Business Finance PLC (CDB) made several key changes to its Board of Directors with its reinforced strategic focus on the targets for 2011-2020 as the "decade of accelerated growth".

CDB's CEO Mahesh Nanayakkara has been re-designated as Managing Director/CEO. Damith Tennakoon who heads CDB's Finance Division has been appointed Chief Financial Officer/Director. Malcolm Weerasuriya who joined CDB in 2000 has been appointed Chief Marketing Officer/Director overlooking sales and marketing.

Sasindra Munasinghe has been appointed Chief Credit Officer/Director.

Roshan Abeygoonewardena has been appointed Chief Operations fficer/Director.

Three new alternate directors, Herschel Gunawardena, P.A. Joseph Jayawardena and Ranga Abeynayake have also been appointed.

Amana Bank appoints Board of Directors

The Monetary Board of the Central Bank of Sri Lanka recently approved the names of persons proposed by Amana Bank as directors on its Board.

The composition of the Board includes representative directors of the bank's strategic shareholders namely Bank Islam of Malaysia, AB Bank of Bangladesh, Islamic Development Bank of Saudi Arabia and Akbar Brothers of Sri Lanka.

The Board of Directors will be chaired by Osman Kassim, the visionary entrepreneur who introduced Islamic finance to the country 14 years ago. Faizal Salieh is the Managing Director and CEO of the bank.

MTD Walkers enters marine engineering; acquires CEE

MTD Walkers has re-entered the marine engineering industry with the recent acquisition of one of Sri Lanka's largest marine engineering companies, Colombo Engineering Enterprises (CEE), a fully integrated, ultra-modern ship repairing facility which is strategically located within the port of Colombo.

The new company is rebranded as Colombo Engineering Services (Pvt) Ltd.

Chief Operating Officer, MTD Walkers Lal Perera said, "This is a very exciting time in our company's development. By re-creating this division for marine services we will be able to meet the needs of all marine engineering services required for ships plying our waters.

Our acquisition of Colombo Engineering Enterprises will allow us to serve our clients with a dedicated specialist team and the Walkers workshop will add value to manage the complex calculations and operations these projects require."

The new company, Colombo Engineering Enterprises will leverage on the existing Walkers fully equipped workshop to expand the current services offered by the Company.